Second Wave

After last fortnight’s sharp drop in grain prices, traders last week hoped that prices might steady. Instead, the biggest sinking spell in a year hit the Chicago grain pits at midweek. In one day, all grain futures tumbled their legal limits. In the cash markets, corn hit its lowest price since April 1945 (at Chicago, No. 2 yellow corn dropped from $1.27 a bushel to $1.17). Oats and rye also broke through the levels of OPA days.

The Administration and traders, who had thought support loans and exports would prop up prices, were worried. Irate farm-bloc Congressmen called in Secretary of Agriculture Charles F. Brannan to ask a Congressman’s perennial question: Who’s to blame? Brannan could do no better than trot out a familiar Administration devil: the speculator. He ordered the Chicago Board of Trade to dig up the names and employment of all buyers & sellers on the fateful Tuesday. Speculators must have been to blame, said Brannan, because he could not see any other reason for such a drastic shakeout.

Glut. Brannan could have found cogent reasons just by glancing at his department’s statistics. There was more grain than the U.S. could eat, store or ship abroad. The Government had already taken a fourth of the bumper wheat crop off the market, by loans and purchases under its support plan. It expected to have to do the same with as much as 600 million bushels of corn—more than is normally sold commercially in a year. But with most storage space filled, a huge amount of “free grain” not encompassed by the support program had been thrown on the market. Cash corn had been driven as much as 40¢ below the support price, and wheat down to 20¢ below its support level.

Brannan and his commodity experts apparently hoped that the supply of free grain would soon be exhausted, and that grain prices would then hold steady. But that was only a hope. The supply of free wheat alone on Jan. 1 was 514 million bushels—more than the U.S. normally eats in a year. Barring drought, the U.S. would probably have another bumper wheat crop, which could run the carryover to 600 million bushels in 1950. And Argentina and Australia already had so much wheat that they were cutting export prices.

With angry U.S. farmers breathing hotly on its neck, the Administration was desperately trying to find a way of dealing with the glut. Congressmen considered several bills providing for the Government to take over—or build—more storage space. Secretary Brannan mulled the possibility of listing wheat officially as surplus. That would force EGA, which recently approved the purchase of 140 million bushels of Canadian wheat for Britain at lower than U.S. prices, to buy all its grains at home. EGA could ship more grain to Europe, since it could now buy more with the funds allotted. The Department of Agriculture lifted all restrictions on exports of edible fats and oils, hoping export demand would steady prices.

Stampede. There was also trouble in the cattle market. As grain prices dropped, cattlemen unloaded their stock. Kansas City’s stockyard bulged with the biggest shipment of grain-fed cattle in its history—and beef prices tumbled. Choice grades of beef which had brought a top price of $41.60 a hundredweight last summer were offered for as low as $25, only $6.25 above OPA levels. Hogs slumped $1 to $20.50, lowest since October 1946. But at the start of this week, both livestock and grains firmed up a bit.

Though housewives were delighted, businessmen, remembering the 1920 collapse, worried that the commodity slump might get out of hand. Though stock prices fell again last week, putting the Dow-Jones industrials below their post-election lows, there were few other signs of a widespread price drop. The Bureau of Labor Statistics’ general index of wholesale prices (food, metals, textiles, etc.) had changed little in a month. The storm, as yet, had blown only on the farms.